KKR may need to up $1.7bn bid for Perpetual

Kohlberg Kravis Roberts’ bid to buy Australian fund and wealth manager Perpetual may need to be revised upward as the company’s ASX-traded stock has surged in recent weeks.

Market realities may force Kohlberg Kravis Roberts’ to boost its A$1.7 billion (€1.3 billion; $1.7 billion) bid to buy Australia’s Perpetual fund group, as a combination of stock speculation and better-than-expected results have pushed the ASX-traded stock higher.

Perpetual is one of Australia’s largest retail fund managers and also runs private wealth and corporate trust businesses. KKR first sent its proposal to the Perpetual board in October, offering to buy all outstanding shares for the price of A$38 to A$40 per share.

At that time, Perpetual’s chairman Peter Scott wrote in a shareholder letter that the “board considers the proposed price does not reflect Perpetual’s value.” However, Perpetual has since confirmed that talks with KKR about a potential acquisition remain ongoing. The firm hired Goldman Sachs as financial adviser and Freehills as legal consultant to review the buyout bid.

KKR’s initial interest in Perpetual may follow a broader strategy that assumed that stocks in the battered financials sector were ripe for the picking as companies struggled to recapitise and retrench in 2010. That was certainly the case for Perpetual, earlier this year, as the ASX-traded stock dropped to a low of A$27 in July, a decline of 42.5 percent from a previous high set in February.

But Perpetual shares have rapidly regained lost ground in recent weeks. Perpetual was trading at just under A$37 on 10 December, up 33 percent from its low in July. The bulk of the stock’s gain came on heavy trading volume immediately after Perpetual announced that KKR was offering a buyout. And that increase puts Perpetual stock just below the lower range of the KKR bid offer of A$38.